REALas Australia’s most accurate property price predictions
REALas Australia’s most accurate property price predictions

Price per square metre: how to use (and not use) it

Price per square metre: how to use (and not use) it
July 20, 2018 Mark O'Neill
Price per square metre: how to use (and not use) it

What is price per square metre?

Price per square metre is the amount of money a buyer is paying for each metre of land they are purchasing. It is one of many tools and measures that investors and buyers can use to compare properties and locations.

To calculate it, take the cost of the house (e.g. $750,000) and divide it by the land size (e.g. 150m2). This will give you a the amount you’ll likely pay per metre of land you’re buying ($5,000/m2). Easy!

(If you’re too lazy, it’s also freely available on each of our properties on REALas!)

Why is it useful?

Identify trends in the market

The main reason people use prices per square metre is to show market trends. If you compare the average price per square metre between years, you can determine whether house values are rising or falling in a certain area.

As a yardstick

The size of a metre is the same in all suburbs and states (Yes, even in Queensland). If you’re looking at a 150m2 and 100m2 blocks in similar areas you could use this number to compare apples with apples.

Focus on the land not on the building

Buildings depreciate, land does not. It’s always smart to consider the land you are purchasing more so than the dream house that’s built on it. A newly renovated ‘modern’ bathroom may not be so new in 20 years’ time. The land its on will probably be more resilient to interior design trends than your lime green bath tiles.

How can it be misleading?

It’s not the size of the land, it’s how you use it

Every home is unique. A 100m2 home is not the same as another 100m2. Location, shape, distance to amenities, and other factors affect the price per square metre. Therefore using it to compare starkly different areas may not give you the best indication of ‘value’, only an indication of what you’re getting for the money.

It Doesn’t tell the whole storey

This measure is susceptible to the size of the house, and generally smaller houses fetch a higher amount vs. a larger house in the same area. By example, a 2 storey house will generally fetch a much more generous $/m2 compared to 1 storey house in the same area as the living space is much larger.

Price per square metre is an informative and helpful way of comparing houses and areas against each other. It’s most useful when looking at similar areas and houses over a period of time. To get the most out of it, try looking at the same suburb between years to see a trend in the market. You’re trying to answer ‘were buyers paying more for land in the suburb you were looking at last year?’

It is not a perfect measure and can be misleading at times, however we recommend you still consider it while you are doing your research.

Which suburbs have a good price per square metre?

If you’re looking for a price per square metre bargain, check out:

 

  • property values

    The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of REALas.